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(Kitco News) - A soft Chinese report that portends contraction in the manufacturing sector prompted big moves in opposite directions for many of the metals Thursday – with industrially oriented commodities like copper taking it on the chin but gold getting a bid on safe-haven demand, analysts said.

HSBC’s flash Purchasing Managers Index for China fell to 49.6 in May from 50.4 in April. Readings under 50 are seen as a sign of contraction, and vice-versa. A slowdown creates worries about demand from the key commodity-consuming nation, which is the world’s largest user of copper and certain other metals.

Against this backdrop, all six of the base metals traded on the London Metal Exchange are sharply lower, led by a 3.2% decline in copper to $7,237.50 a metric ton and a 2.6% fall in tin to $20,920 as of 10:08 a.m. EDT. Platinum group metals are also softer, although less dramatically so, on the New York Mercantile Exchange. Platinum was down 0.8% to $1,456.90 an ounce and palladium was down 1.8% to $738.25 an ounce.

Meanwhile, June gold on the Comex division of Nymex raced ahead by $16.80, or 1.2%, to $1,384 an ounce and earlier was even stronger.

“The Chinese manufacturing PMI was below the 50 level and below consensus expectations, so we’ve seen the more industrial metals fall,” said Robin Bhar, metals analyst with Societe Generale.

In the case of copper, the market flipped lower after being supported Wednesday on news that Freeport McMoRan Copper & Gold’s giant Grasberg mine in Indonesia will remain closed for a while until the company feels sure it is safe, following a recent tunnel collapse that killed 28 workers. This Grasberg news came when the Bingham Canyon Mine in Utah was already shut down after a landslide last month.

“Although supply outages are still prominent, with Bingham Canyon and Grasberg being the most prominent mining names in the headlines, investors are much more sensitive to demand trends, which continue to head south,” said Edward Meir, commodities consultant with INTL FCStone.

He pointed out that some major banks have scaled back their expectations for Chinese economic growth lately, although the forecasts were still around 7.6% to 7.7% for 2013.

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“For its part, the Chinese government appears to be comfortable with moderating growth prospects, as the authorities see inflationary pressures being reduced as a result,” Meir said. “Moreover, the local labor market remains strong, another reason why the government is not keen to launch any major new initiatives. However, reduced demand prospects for metals, coupled with abundant capacity and a government not inclined to ‘prime the pump,’ means that China will not be coming to the rescue of the metal markets as it did in 2008-2009.”

Gold, meanwhile, rose sharply overnight, particularly with equities also on the defensive. Tokyo’s Nikkei index lost 7.3%. In early New York trading, the Dow Jones Industrial Average was down by around 85 points.

“With the equity markets under pressure, you’re seeing a renewal of safe-haven demand in the gold market today,” Meger said.

Another trader said there is some reversal of a trend that had been in place for much of the year where gold fell on a reallocation of assets as the DJIA and S&P 500 index hit record heights.

The equity weakness has been blamed in large part on the weak Chinese economic data. The Tokyo market was also hurt by rising bond yields. Some observers also said at least some uncertainty about the Federal Reserve’s accommodation is undermining equities. Bernanke told a congressional panel Wednesday that there was a risk to withdrawing accommodation too quickly, implying it would continue. But later in his appearance, he also said the Fed could begin stepping back its bond-buying program in the next few meetings, if the economy keeps improving.

There is an expectation markets generally may tumble whenever the Fed starts its withdrawal, one trader said. “So everyone wants to be the first one out the door,” he added.

Bhar said there is potential for short covering in metals across the board as traders square positions ahead of a three-day holiday weekend coming in both the U.S. and U.K. Short covering is when traders buy to exit positions in which they previously sold into the market.

Read the latest news in gold and precious metals markets at Kitco News.

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